Thursday, July 24, 2008

Amazon Keeps Taking Share!

Not only is Amazon taking share of business away from eBay and other online ecommerce sites, but they are apparently taking share away from the offline world as well.

The online data is easy to track with Amazon active users growing 18% Y/Y in the 2nd quarter to 81 million, compared to eBay, which grew active users by 1% Y/Y to 84 million in the most recent quarter.

So where are these new Amazon customers coming from? Certainly they are coming from other online retailers and marketplaces, with eBay and Overstock recently reporting slowdowns, but could they also be coming from traditional B&M retailers as consumers decide to travel by mouse rather than car.

Perhaps Amazon is getting an increase in share of new online shoppers who would prefer to shop from home than drive to the store. Jeff Bezos suggested that during the conference call; "On the fuel prices we suspect that higher fuel prices may be a relative advantage for us both in terms of relative to physical world stores because of the expense of driving to a store, even just driving 10 miles these days is a few dollars worth of gasoline and consumers we suspect are beginning to take that into account and think about that and try to do trip consolidation and so certainly our free shipping offers and Amazon Prime become very high, a clearly of even more value to customers under that set of circumstances.

And then relative to other online retailers because of our scale we have a distributed fulfillment center network that places products closer to customers that allows us to do fast transportation to customers, fast deliveries to customers but usually using ground transportation instead of air transportation and ground transportation is much more fuel efficient then air transportation. So probably this is a relative advantage for Amazon and its our job to insulate customers since we offer free shipping and Amazon Prime offers fast free shipping, the burden is upon us to make sure that we can do that in a way that is economical for us so that customers can continue to enjoy those free shipping offers and we have clearly no intention of changing those. We’ll keep them in place."

I'm not an analyst, but I would think the fact that Amazon is taking share from competitors during an economic downturn would be a positive even if their margins get compressed a little. Once Amazon gets a customer they won't likely lose them and as they expand categories and consumers can find just about anything they are looking for on Amazon they will continue to grow their customer base.

The metrics that stick out to me are: Revenue growth 35% Y/Y (Excluding FX), unit growth 32% Y/Y and customer growth 18% Y/Y. Margins will be tight but at least in this current environment if Amazon is growing those three metrics they are headed in the right direction, IMO.

Here is an article and video clip that makes my point.

Just my 12%


ms.pat said...

That's as it should be if a company is well managed. With gas so high and people driving less and less any internet company who isn't making revenue is simply not well run. Most of us now look to the net before we go out shopping.

Anonymous said...

Besides ebays horrid treatment of sellers my partner uses amazon for a totally different reason. A favorite charity of hers contains a link to amazon. When she clicks that link and continues to amazon, they donate 5% of the purchase to her charity. Ebay can't do that they have no cart. Even if they could they wouldn't. Unconditional donation is not their way, they want to know what's in it for them... like a promo piece

ms.pat said...

LOL the only donating ebay does is to itself! :-)

Andy Geldman said...

The way donation sites work is using affiliate programs - they get a commission when you buy and they give some or all of that commission to charity.

The same thing should be possible with eBay (if their affiliate program rules allow incentives).